The most recent data from the S&P and Case-Shiller index shows that home prices rose for the fifth consecutive month. This index looked at twenty major cities and found that home prices rose 0.2% in August. However, prices are still lower on a year-over-year basis by 3.8%. David Blitzer, a spokesman for S&P, said, “Even though the[year-over-year] rates are improving, national home prices are still below where they were a year ago.” For people who are looking to sell their home, a rise in home prices could be good news; not so, however, for those looking to buy a new home. This could be good for the overall economy, but it is still unclear what home prices will do in the following months.
Certain areas are doing better than others. Ten off the twenty metro areas that were covered by the Case-Shiller index saw a rise in home prices. Home prices rose 1.6% in Washington, D.C., and 1.4% in Detroit and Chicago. However, other areas saw a fall in home prices; 2.4% in Atlanta, 0.4% in Los Angeles, 0.3% in Las Vegas, 0.2% in San Diego, and 0.1% in San Francisco and Phoenix.
As long as the overall economy stays weak, home prices will continue to hover around their current levels. When the economy is weak, there are more foreclosures. Lending standards are also strict right now, and unless they ease up, there may not be a big change in the price of homes.
The changes that were made to the Home Affordable Refinance Program (HARP) by the Obama administration are unlikely to have an effect on home prices. The main focus of the changes that were made to HARP was to help people stay in their present homes instead of buying new ones. These changes allow borrowers to refinance at a lower rate, which has the potential to lower monthly house payments. While this may provide a boost to the economy, it is unlikely to help those people who are looking to buy a new home. It may help prevent defaults and foreclosures, which means there are fewer distressed homes on the market pulling down the value of those and other homes in the area.
The best thing that could happen to the housing market would be a boost to the economy and job market. Once people are able to find jobs, and the unemployment rate decreases, people will start to feel more financially secure and confident. As money is spent, the economy will also receive a fillip. People will also feel that they have enough money to qualify for and purchase a home. Analysts are anticipating home prices to continue to drop though. The main reason is that more distressed houses will come onto the market and sell, which tends to bring down the price of homes overall. If that happens, home prices could reach a new post-bubble low since 2006.
